10-QPeriod: Q2 FY2013

ISHARES GOLD TRUST Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 8, 2013For Securities:IAU

Summary

The iShares Gold Trust (IAU) 10-Q filing for the period ending June 30, 2013, reveals a significant decline in the Trust's net asset value and a substantial decrease in outstanding shares. The primary driver for these changes was a sharp drop in the price of gold, as measured by the London PM Fix, which fell by 25.42% during the quarter. This decline in gold prices led to a decrease in the Trust's net asset value per share and a corresponding increase in share redemptions by investors seeking to exit their positions. Despite the challenges presented by the falling gold market, the Trust maintained its core operational structure. The Sponsor's fees remained a relatively small expense compared to the overall asset value. The filing also details the accounting treatment for gold bullion, emphasizing the lower of cost or market valuation method and the use of a market value reserve to account for unrealized losses. Investors should note the continued concentration risk associated with gold bullion holdings and the Trust's passive investment strategy.

Financial Highlights

13 data points
Beta

Revenue

-$839.74M

Net Income

-$845.27M

100.7% Net Margin

EPS (Diluted)

$-2.66

Total Assets

$6.86B

Cash & Equivalents

$0.00

Free Cash Flow

$0.00

Financial Statements
Beta
Revenue-$839.74M
Operating Expenses$5.53M
Net Income-$845.27M
EPS (Basic)$-2.66
Shares Outstanding (Basic)318.92M

Key Highlights

  • 1The Trust experienced a substantial 37.06% decrease in its net asset value during the quarter ended June 30, 2013, primarily due to a significant decline in gold prices.
  • 2Outstanding Shares decreased by 109,150,000, indicating a net outflow of investor capital driven by redemptions.
  • 3The London PM Fix price for gold dropped by 25.42% in the quarter, directly impacting the Trust's asset value and share performance.
  • 4A 'market value reserve' of $894,628,016 was recorded to reflect unrealized losses on gold bullion, impacting the net income for the period.
  • 5The Trust's net loss for the quarter was $845,267, largely attributable to the market value reserve adjustment.
  • 6The Trust continues to operate as a passive investment vehicle, with its objective being to mirror the price of gold, less expenses.
  • 7Gold bullion held by the Trust is valued using the lower of cost or market method, with fair value based on the London PM Fix.

Frequently Asked Questions

The primary reason for the decrease in the iShares Gold Trust's net asset value was a significant decline in the price of gold. The London PM Fix, a key benchmark for gold pricing, fell by 25.42% during the quarter ending June 30, 2013, directly impacting the value of the Trust's gold holdings.

Investors reacted to the falling gold prices by redeeming their shares. During the quarter, 109,150,000 shares were redeemed, leading to a substantial decrease in the total number of outstanding shares and a corresponding drop in the Trust's overall net asset value.

The 'market value reserve' is an accounting adjustment recorded when the market value of the gold bullion held by the Trust falls below its average cost. It is used to reflect these unrealized losses on the financial statements, as the Trust values its gold holdings at the lower of cost or market. This reserve significantly contributed to the net loss reported for the quarter.

The Trust primarily incurs a 'Sponsor's fee,' which accrues daily at an annualized rate of 0.25% of the net asset value. The Sponsor, iShares® Delaware Trust Sponsor LLC, has agreed to assume most other administrative and marketing expenses, including trustee fees, custodian fees, listing fees, and audit fees. This arrangement helps to minimize direct expenses for the Trust itself, though the Sponsor's fee is reflected in the calculation of net asset value.